Most traditional documented loans require the borrower to submit a whole host of different information. You will be required to show your W-2s or pay stubs, tax return for a couple years, list all of your creditors and even disclose anything that could affect your finances. The process of getting traditional loans approved is often very tedious. If you are self-employed, proving your income can be very difficult at the best of times. Fortunately for these people, no doc home loans are available.
Also known as stated income mortgage loans, these loans allow borrowers to state their income in the application process. Like the name suggests, no doc loans mean that the borrower has to provide little documentation in order to get the loan approved. You don’t need to worry about showing W-2s or pay stubs to lenders because they don’t require you to prove your income. You will need to disclose your annual income which would include showing bank statements and tax returns for the past couple of years.
Other popular low doc loans include no income/no asset (NINA) loans. Similar to the previous no-doc loan, these loans don’t require proof of income or proof of assets. The higher your credit score is, the less documentation that you will need for the loan. These loans are used for home purchases, home equity loans, and home equity line of credit (HELOC) loans. When it comes to getting low doc loans approved, your credit rating is the most important piece of information that lenders look for when considering loan applications. Borrowers with a poor credit rating should not expect to get loan approval for these loans.
Due to the recent sub-prime mortgage lending meltdown, many lenders will also take a close look at the borrower’s debt to income ratio. The debt to income ratio is considered a measuring stick to a well you are positioned financially to repay your debt. The higher the debt to income ratio, the less likely you’re to be able to continue making payments on your loans. Most lenders won’t consider anyone who has a debt to income ratio over 45% when they are looking at mortgages.
Borrowers who are looking to get a no doc home loans approved should go online to look up the different lenders that are available. Because the market for lending is very competitive, if you look around you can be sure to get a good interest rate on your loan. These loans are very useful for people who have a difficult time trying to prove their income.
